It was a long-awaited decision, but Congress finally approved several key IRS tax extenders before the calendar turned to 2015.
On Tuesday, Dec. 16, the Senate passed a bill that the House of Representatives had initially signed off on to extend several tax breaks for both individual taxpayers and small business owners. The bill is formally known as the Tax Increase Prevention Act. While some of the extenders go beyond 2014, many of these tax breaks must be claimed by year’s end.
Here are several key highlights of the bill:
- The bill includes several IRS tax extenders for business owners. It allows business owners to claim an additional first year deduction of 50% of equipment costs. The provisions in Section 179 of the federal tax code have been extended. These rules allow for the expense of $500,000 on acquired business property. In addition, the exclusion from capital gains tax of 100% of small business stock sold by individuals has been extended. Others include the Work Opportunity Tax Credit for hiring military veterans as employees and the Research Tax Credit.
- Several energy-related tax breaks have been extended through Dec. 31 and beyond. These include a tax credit for non-business, energy-efficiency property (extended one year), biodiesel and renewable diesel tax credits, the renewable electricity production credit (including the wind production credit), and the above the line deduction for energy-efficient commercial buildings.
- Elementary and secondary schoolteachers are still able to claim an above-the-line deduction of $250 in out-of-pocket costs they incur for classroom items related to education.
- Some taxpayers who do not itemize their tax deductions face special mandatory minimum distribution requirements from their retirement savings accounts and, subsequently, are unable to deduct contributions they make to charities. This bill includes a tax extender that allows these individuals to avoid taxation on their IRA distributions if they transfer this money to a qualified charitable organization by Dec. 31. You may be able to transfer up to $100,000 to a charity and take advantage of this tax break.
- Through the end of the year, Congress also extended a provision allowing taxpayers to write off their state and local sales taxes from their taxable income rather than claiming their state income taxes as a deduction. If you have considered making a large purchase like a new vehicle, boat, or other expensive equipment, it may be wise to get that dream car in your garage before the year is out. This could offer big tax savings to those in states with no state income tax, such as Florida.
- Another one of the IRS tax extenders involves tuition. Consider making any tuition payments for the upcoming school semester by Dec. 31 before this extender expires. If your income falls under certain levels, you can generally deduct up to $4,000 in qualified tuition and education costs. If you have not spent this amount yet, but there is an opportunity to do so now, take advantage of it.
To learn more about how you can reduce your taxes by year’s end, and ways to save during the 2015 tax year, contact 1-800Accountant at 1-800-222-6868 or at www.1-800Accountant.